Brent Dips Despite Bab el-Mandeb Closure Threats

In the news, Iran has reportedly instructed Yemen's Houthi movement to prepare to close the Bab el-Mandeb Strait should the US follow through on threats to strike Iranian power infrastructure. Reuters sources have claimed that the Houthis have positioned drones and missiles near key shipping lanes and are awaiting final orders, with operations reportedly overseen by IRGC personnel in Yemen. The Bab el-Mandeb handles around 7% of global energy trade, meaning any disruption would likely force vessels around the Cape of Good Hope, increasing freight costs and adding further pressure to global energy markets as flows through the Strait of Hormuz remain heavily disrupted. Elsewhere, Iraq briefly suspended crude loadings at its Basra export terminal after a drone was reported near an oil tanker, before operations quickly resumed. Iraq's Oil Ministry later denied reports of an attack, stating the incident involved a vessel reporting a foreign object nearby, with no damage to the tanker or export infrastructure. SOMO also confirmed the event was not a direct attack on the Basra terminals or vessels. In China, PetroChina has successfully started up the 1.2Mmt/yr ethylene expansion at its Dushanzi Petrochemical complex on the first attempt. The project increases the site's total ethylene capacity to 3Mmt/yr, strengthening production capacity in western China and enhancing its competitiveness with global producers. In other news, India has advised shipowners and managers not to deploy Indian seafarers on vessels transiting the Strait of Hormuz until further notice, citing the deteriorating security situation in the region. The guidance follows intensified attacks on commercial shipping, including an Iranian strike earlier this week that killed an Indian crew member aboard a UAE-managed tanker. Finally, at the time of writing, the front-month (Sep/Oct) and 6-month (Sep/Mar’27) Brent futures spreads are at $1.22/bbl and $5.98/bbl, respectively.

This afternoon in Dated we saw strong selling of Aug Dated/Dubai from a Chinese player, pushing down the Aug DFL to lows of $0.89/bbl and Aug Sep DFL down to -$0.24/bbl pre-window. The physical window was better offered with a British major offering a Brent cargo, pushing the implied diff down to around -130c. We saw a trade lift a refiner high on a Midland cargo offer. In the paper window, we saw paper selling CFDs again. 20-24 Jul printed -$1.25 in 200kb, 27-31 Jul printed -$0.80 in 500kb, 3-7 Aug printed +80c to +66c in 600kb and 10-14 Aug printed +95c in 400kb . Post-window we continued to see buy-side interest in 1-7 Sep vs Cal Sep whilst 27-31 3-week was sold at -$0.45/bbl.

This afternoon in Brent/Dubai we traded lower, with the Dubai spreads trading higher, up from $0.20/bbl to $0.40/bbl, some buying by fund. The Aug Brent/Dubai traded lower, down from $5.80/bbl to $5.50/bbl, with there being selling in Dated/Dubai by Chinese. There was some box selling by trade, Q4/Q1'27 box offered down from $1.40/bbl to $1.29/bbl.

VLSFO recovered somewhat in the afternoon. It was a largely gappy afternoon with cracks in the front trading above $20.00/bbl before coming back down somewhat closing the afternoon around $19.60/bbl. Spreads followed a similar pattern, the Aug/Sep traded up to $40.00/mt before closing the afternoon around $39.25/mt. Euro 0.5 followed a similar trend with Euro crack trading down a touch to $7.20/bbl while Aug/Sep Euro closed around $21.00/mt.

A stronger afternoon on HSFO. Chinese were fairly aggressive this afternoon buying 380 flat price in August. This saw the 380 crack roof up to -$3.20/bbl from the lows of -$4.50/bbl. 380 spreads were stronger as a result with Aug/Sep trading up to $13.00/mt from $10.00/mt. 380 E/W recovered buying back up to $30.00/mt from $25.00/mt due to Chinese arber buying. The barge crack strengthened off the back of 380 crack buying trading up to -$8.00/bbl. Aug/Sep barges was largely unmoved closing around $6.00/mt.

This afternoon in distillates, Sing gasoil spread buying stepped up, with Sep/Oct trading from $6.60/bbl up to $6.98/bbl, while front E/W also firmed, with Aug moving from -$69/mt up to -$67.50/mt. Sep/Oct kero was well offered, while front regrade was supported but sold into by market makers.

ICE gasoil spreads rallied throughout the afternoon, with Sep/Dec trading from $147/mt up to $157/mt, while Sep cracks reached $35.10/bbl. European jet diffs remained rangebound, with Aug trading at $85/mt, while Q4 traded at $86/mt. Both heating oil spreads and HOGOs strengthened, with the Aug HOGO swap trading from 30.0c/gal up to 30.6c/gal.

We had a choppy afternoon in gasoline. RBBRs weakened post US open, pushing Aug arbs down from 26.70c/gal to 25.60c/gal, with Q4 arbs offered down to 25.85c/gal. EBOB cracks rallied from  $36.50/bbl to $37/bbl before weakening to $36.10/bbl, with Aug/Sep coming off from $74/mt to $71/mt. The East was thin: there was mixed interest on cracks as they remained rangebound between $20.80/bbl and $21/bbl and Q4 was bid up to $12.50/bbl.

This afternoon in naphtha, little interest in MOC with prompt crack trading -$2.80/bbl end of window. Crack better offered this afternoon with spreads getting lifted by a market maker, seeing deferred cracks trade lower with Q4 getting hit at -$6.85/bbl, but recovering back to -$6.70/bbl by end of window. Outright buying in spreads in Q4/Q1 region today, seeing Jan/Feb getting lifted $8.75/mt with a screen buyer of Q2/Q3'27 at 0.3/bbl. E/W comes off this afternoon, seeing Aug trade down from $48.50/mt to $46/mt.

This afternoon in NGLs, FEI found some support after a choppy morning, and priced up slightly across the afternoon. Aug/Sep FEI traded up to $27/mt, having ended the morning at $25/mt. LST/FEI interest remained in the front, and the Aug arb traded at -$280/mt, the same level as the start of the morning. Q4 LST/FEI was also trading at -$224/mt with buyside interest. LST spreads had some selling in Aug/Sep at -0.5c/gal, where it eventually settled post window, and there was also Aug/Q4 selling at -1c/gal, that weakened across the afternoon to -1.375c/gal. In Butane, there was spread buying in the deferred, with Q4'26/ Q1'27 trading at 4c/gal, and Q1/2'27 was lifted at 1c/gal. There was also a C4 ENT/naphtha buyer, lifting Aug, Sep, Q1'27 and Cal'27.